Government Shutdown, Debt Ceiling Deal Includes One Tax Provision

Wednesday’s deal to fund the federal government through
Jan. 15 and to extend the federal government’s borrowing
authority through Feb. 7 in the end contained only one tax
provision, making a minor change to 2010’s health care
legislation. The agreement, H.R. 2775, was passed by the
Senate in a 81–18 vote on Wednesday and by the House of
Representatives in a 285–144 vote. President Barack Obama is
expected to sign it immediately since, without an increase in
the debt ceiling, a U.S. debt default could happen as soon as
Thursday.

A separate part of the agreement, not
included in the bill but made in a separate Senate motion,
will create a framework for formal budget negotiations. These
will be scheduled to conclude by Dec. 13, with negotiators
charged with making recommendations for long-term budget and
deficit reduction goals.

The change to the health care
law under the agreement reached Wednesday sets up a new
requirement that the eligibility of people who receive
cost-sharing reductions under Section 1402 of the Patient
Protection and Affordable Care Act, P.L. 111-148, or the
health insurance premium tax credit under Sec. 36B, be
verified. Under the agreement, the secretary of Health and
Human Services must ensure that health insurance exchanges
verify that individuals applying for the credit or
cost-sharing reductions are eligible and must certify to
Congress that the exchanges are verifying eligibility. The
secretary is required to report to Congress by Jan. 1, 2014,
what procedures exchanges are using to verify eligibility.

The health insurance credit is available to eligible
individuals who purchase coverage under a qualified health
plan through one of the new health insurance exchanges. The
credit subsidizes the cost of health insurance for certain
low-income individuals.

To be eligible for the credit,
a taxpayer must (1) have household income between 100% and
400% of the federal poverty line (FPL) amount for his or her
family size (starting in 2014, persons with income below 133%
of the FPL are eligible for Medicaid), (2) not be claimed as a
dependent by another taxpayer, and (3) if married, file a
joint return. The credit amount is the sum of “premium
assistance amounts” for each month the taxpayer or any family
member is covered by a qualified health plan through an
exchange. The premium assistance amount is the lesser of (1)
the premium amount or (2) the result of a formula based on a
“benchmark plan” and the taxpayer’s household income (Sec.
36B(b)).

Tax items dropped from the final
agreement

Democrats reportedly had proposed delaying for
one year the annual fee on health insurance providers, which
is scheduled to start in 2014. The fee applies to entities
engaged in the business of providing health insurance for U.S.
health risks for calendar years beginning after 2013. The fee
that each covered entity owes will be based on an
apportionment of a total applicable amount for each year. The
applicable amount is $8 billion for calendar year 2014. That
proposed one-year delay was not incorporated into the final
deal.

Another element of the health care law, the Sec.
4191 medical device excise tax, the repeal of which had
reportedly been the subject of discussions as recently as last
weekend, is also not part of the agreement. Under this
provision, a tax equal to 2.3% of the sale price is imposed on
the sale of any taxable medical device by the manufacturer,
producer, or importer of the device.

A proposal to
require members of Congress, the president, and the cabinet to
obtain health care coverage through the exchanges, but not
receive an employer subsidy from the government, also is not
included in the agreement.

As was widely reported, a
desire by some members to defund the health care reform
legislation was one of the reasons Congress could not agree to
a continuing resolution that would have kept the federal
government fully operational on Oct. 1. However, defunding the
law is also not part of the final agreement.

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